In the aftermath of World War II, the United States, the United Kingdom, and France convened a meeting at Bretton Woods, New Hampshire to establish a new economic order that would bring stability to the world’s economies.

In 1973, the Bretton Woods Accord and its subsequent Smithsonian Accord and the European Joint Float Agreement ended. There were no new agreements to take its place as the United States in the same year ended its peg to gold in order to manage inflationary pressures at home. In the absence of any agreements, foreign exchange rates started to fluctuate. Governments were allowed to peg, semi-peg, or freely float their currencies.

 In the late 1970’s and 1980’s, without a formal framework to control foreign exchange rates, open trading in FX started to explode. The major holders of the world’s cash, global banks, were the major players in the market. They set up FX trading rooms in the world’s major financial centers, connected them with analog phones to each other and to FX brokers, and started moving billions of dollars a day around the world. They matched off their customer flows of currency with speculative bets on the direction of exchange rates. Speculative trading in FX started to expand as well, as market participants began to see the volatility and potential for profit inherent in the FX market.

 Since the 1990’s, technology has been the driving force in FX trading. The Internet and inexpensive global communications networks have flattened the playing field and slashed the costs of trading in FX. The enormous trading rooms the global banks built, with thousands of telephones connecting traders and brokers from around the world have been replaced by silent computer servers processing an exponentially larger volume of business than was seen 10 years ago. The information that gave the banks and major hedge funds a trader’s edge is now readily accessible over the Internet at the same time that professional traders receive it.